Final Results

RNS Number : 4901S

JPMorgan US Smaller Co. IT

17 March 2016

 

LONDON STOCK EXCHANGE ANNOUNCEMENT

JPMORGAN US SMALLER COMPANIES INVESTMENT TRUST PLC

FINAL RESULTS FOR THE YEAR ENDED
31ST DECEMBER 2015

The Directors of JPMorgan US Smaller Companies Investment Trust plc announce the Company's results for the year ended 31st December 2015.

CHAIRMAN'S STATEMENT

Performance

2015 was not an easy year for investors in many major markets and positive returns were hard to come by so it is very pleasing to report to shareholders that the Company's net asset value (NAV) increased by 4.0% reflecting both good stock selection and a rise in the US dollar against sterling. Our return on net assets also compared favourably with the Russell 2000, in sterling terms, which increased by 0.9%. The Company's share price rose by 6.8% over the year as the discount to NAV narrowed year-on-year.

Discount and Premium

The outperformance of the share price relative to the NAV as at the year end resulted in a narrowing of the discount. At the risk of being wrong by the time this report goes to print, it is encouraging to see that despite volatile markets over the past several years the Company's share price has traded in a consistent range relative to NAV. US smaller companies are seen as riskier assets, and therefore more volatile in nature, and it is always going to be challenging aligning our share price movement with the change in the NAV, particularly during periods of reduced market liquidity. The relationship between the share price and the NAV is, however, monitored on a daily basis by the Board and our professional advisers. To help the management of the discount, we have in place the authority to repurchase up to 14.99% of the Company's issued share capital and we will be seeking renewal of this authority at the AGM. During the year this authority was not exercised. Currently the Company holds 845,000 shares in Treasury, having purchased 200,000 shares into Treasury since the year end.

Annual Management Fee

The Board, in conjunction with its advisers, regularly reviews all costs and it had become clear that the annual management fee of 1.2% on the Company's gross assets up to £100 million, and 1% on any gross assets in excess of that amount, was starting to look out of line with other specialist overseas investment trusts. The Board was therefore delighted to announce in November that with effect from 1st January 2016 the annual management fee is now a flat 1% calculated using gross assets.

Board Succession Planning

As a Board we have now put in place a succession plan, which we believe will reduce the disruption that can be caused by the retirement of non-executive directors (NED) after nine years' service when a board consists of only five directors, all of whom are non-executive. Our problem has been exacerbated as we recruited three directors in relatively quick succession 10 years ago. It is tempting to point out that our shareholders are losing the benefit of considerable experience through the enforcement of this rule in investment companies, however we will respect the guidance and are in the process of making the required changes which, we hope, will avoid compromising the balance of skills on the Board. At the AGM we are asking shareholders to vote on increasing our Directors' Fee Limit which will allow us to recruit a new director in the second half of 2016 taking the Board temporarily to six directors as we plan for the next retirement. At six directors we believe we have good gender diversity and the correct balance of skills, and we will comprise one director appointed in 2012, one in 2014 and one to be recruited in 2016.

Board Apprentice Programme

JPMorgan US Smaller Companies Investment Trust is delighted to be working with Board Apprentice (www.boardapprentice.com), an organisation which is directly addressing the issue of improving NED board diversity. Board Apprentice finds able candidates from diverse backgrounds who could potentially serve as NEDs but lack the necessary experience. It then matches those candidates to boards who are willing to provide the necessary training and mentoring. Importantly, participation in this programme has no cost to the company offering the training programme. We have appointed Shefaly Yogendra as our Board Apprentice. She has spent her career to date working with investors and start-up companies, advising CEOs, and teaching multi-disciplinary courses to both undergraduates and graduates in India, I am sure we will also get a lot from her participation in our board discussions.

Revenue and Dividend

The revenue for the year, after taxation, was £929,000 (2014: £647,000). Despite the Company generating positive current year revenue, it still has a revenue reserve deficit, and therefore Directors are not proposing payment of a dividend this year. Once the revenue deficit has been cleared the Board will consider paying a dividend but shareholders should note the Company's objective remains that of capital growth.

Gearing

In April 2015 our revolving credit facility with Scotiabank was renewed at US$20 million with an option to draw a further US$10 million. At the end of 2015 US$20 million was drawn and the portfolio was 9.9% geared. This facility matures in April 2016 and the Board will consider another gearing facility at this point.

Currency Hedging

Our portfolio is denominated in US dollars but is converted into sterling on a daily basis for calculating the NAV which exposes the assets to fluctuations in the US dollar/sterling exchange rate. The Board has the authority to reduce or eliminate the exposure to fluctuating currencies through the use of currency hedging. We review our policy on currency hedging regularly but to date we have not carried out any hedging and have no plans to do so in the immediate future.

Annual General Meeting

We are holding our AGM at 60 Victoria Embankment, London EC4Y 0JP on Monday, 25th April 2016 at 2.30 p.m. As in previous years, there will be a presentation by one of the investment management team which will cover a review of 2015 as well as the outlook for the current year. Following the meeting some refreshments will be served which will provide shareholders with the opportunity to meet the Directors and the representatives from JPMAM and ask any questions on the portfolio and performance. If you have any detailed or technical questions, it would be helpful if you could raise them in advance of the meeting by writing to the Company Secretary at 60 Victoria Embankment, London EC4Y 0JP.

Outlook

At the time of writing this report 2016 has produced one of the worst starts to a year for equity markets since the 1970's as investors are faced with absorbing a lot of bad news (slowing growth in China, refugee crisis, global terrorist attacks, Iran and Saudi tensions) and little in the way of good news. On a positive note, sell-offs in markets tend to get overdone and create good buying opportunities for those investors prepared to invest for the long term.

I continue to believe that our Company has in place the key ingredients that an investor should look for in any potential investment: people, investment philosophy, investment process, strong and stable ownership and performance. Performance is deliberately last as you cannot 'buy' past performance, whereas the other factors will be there in the future. 'People' is undoubtedly the key factor and with Don San Jose and his co-head Dan Percella, the Company has two experienced US small cap managers who, along with three other members of the team, have built a strong team culture around them within the New York-based group. The team has a clearly defined investment philosophy and a disciplined investment process, and importantly, with JPMAM being part of one of the strongest financial institutions, the asset management business is both stable and well-resourced. The US is now entering a Presidential election year which will create its own set of uncertainties, especially to outside investors, however it should not be forgotten that the US economy has a long history of creating exciting growth prospects in the small cap sector and our Company should continue to take advantage of these opportunities for the reasons set out above.

Davina Walter

Chairman                                                                                                                                         17th March 2016

INVESTMENT MANAGER'S REPORT

2015 was a rather frustrating one for US equity investors, with an annual gain of only 1% in dollar terms for the S&P 500, largely thanks to dividends and the very strong returns from a handful of large cap technology-driven stocks. There was a defensive tone in the markets as large cap stocks outperformed smaller cap names and the Russell 2000 Index lost 4.4%. Currency helped GBP investors, as they enjoyed a return of 7.0% for the S&P 500 and 0.9% for the Russell 2000 in GBP.

Throughout the year, investors grappled with the positive influence of a gradual recovery in US consumer spending, improving employment trends (admittedly a lagging indicator), and continued low interest rates versus the increasingly negative influence of weaker global economic growth, tumbling commodity prices, and a Fed that wanted to begin a monetary tightening cycle. In fact, the long awaited Federal Reserve's first move finally came on 16th December when the Fed raised the federal funds rate from 0.25% to 0.50% ending seven years of a near-zero interest rate policy. In her press conference, Chair Yellen emphasized that 'gradual' did not mean 'mechanical', suggesting that investors should not necessarily expect one rate hike at every other meeting and that the Fed would be data dependent.

The strong dollar, increasing supply from shale technology, overspending (aided by years of low interest rates) and slower global growth dealt a mighty blow to the energy sector in the form of lower oil prices. Over time, the disease seemed to spread to the broader industrial sector which had previously benefited from a strong energy capex cycle. As a result, quarterly corporate profits began to stagnate and then deteriorate and 2015 is unlikely to show an increase in corporate profits once numbers are rolled up for the year.

The year could have been worse of course, but lacklustre returns and markedly higher volatility made for an unwelcome contrast with the previous three years.

Investment Performance

For the year to 31st December 2015, the Company's total return on net assets was 4.0%, ahead of our benchmark, the Russell 2000 Index, which rose 0.9% in GBP.

With only a handful of sectors posting a positive return for the year, stock selection was critical and was the key driver of the portfolio's performance. In particular, our stock selection in the consumer discretionary, materials & processing, financial services and energy sectors added value. Each of these sectors outperformed their benchmark peer group by an average of 15%.

Overweight positions in Pool Corporation and Jarden were among the top contributors in the consumer discretionary sector as well as the portfolio overall. Pool, a wholesale distributor of pool equipment and supplies, reported better than expected earnings during the year. These results were particularly impressive as many investors were concerned that California's drought and oil-related job losses in Texas would weigh on results. We have selectively trimmed our position to manage risk but the stock remains a core holding as we appreciate the visibility in the business from a recurring revenue stream and we remain confident in management's strategy and the fundamentals of the business. Jarden, a provider of a broad range of consumer products, announced that they were being acquired by Newell Rubbermaid at roughly a 25% premium to Jarden's share price pre-merger speculation. While we are sad to see Jarden go, as it has been a strong outperformer for us through the years, we note that we think management has again made a smart capital allocation decision in selling the company at this point.

Our strong performance in the materials & processing sector was predominately driven by our exposure to Patrick Industries and to a lesser extent positions in AptarGroup and Comfort Systems. Patrick Industries manufactures building products and materials for the recreational vehicle and manufactured housing industries. Patrick reported strong earnings during the year as it used its balance sheet strength to make key acquisitions that helped drive results. Patrick is a key supplier and trusted partner in the recreational vehicle (RV) supply chain. They operate a nationwide, integrated manufacturing and distribution network which creates a strong competitive advantage by keeping the company close to its customers. Their experienced management team have made strategic acquisitions in a highly fragmented industry, while accelerating organic growth in excess of the RV market's recovery by increasing content per RV through new product introductions. While we believe that the long term demographic trends support continued growth in the industry, we have been trimming our holding on strength to manage our position size and exposures.

The fourth of our top contributors was Waste Connections, a provider of solid waste collection, transfer and disposal services. The stock was rewarded for its positive third quarter earnings report, which demonstrated continued momentum in the company's core solid waste business. We trimmed some of our position during the year, but we continue to have conviction in the name. It remains one of the largest positions within the portfolio given its strong recurring revenue and free cash flow generation. Moreover, Waste Connections is guided by a capable management team with a track record of long-term value creation and disciplined capital allocation.

In contrast, our stock selection and underweight exposure in health care and technology sectors detracted the most from relative performance. In health care, it was really a question of names that we did not hold that caused the most damage. Biotechnology concerns such as Anacor Pharmaceuticals, Dyax and Neurocrine Biosciences drove the benchmark's performance in the sector as they rallied on average 190% for the year. We continue to find it difficult to find compelling investment ideas within the health care space that meet our investment criteria, particularly in the biotech sub-sector and we remain underweight this area. Within technology, our exposure to Rovi for some of the period detracted the most from the overall portfolio as well as the sector. The company has been engaged in patent litigation throughout the year, and announced that all five of the patents under question in an interactive program guides (IPG) patent infringement case versus Netflix were deemed invalid. While Rovi holds over 3,500 patents, the fact that all five were named invalid called into question the validity of the remaining portfolio. We exited the name following the announcement.

Another detractor during the period was Ascent Capital Group, a holding company that provides home security alarm monitoring through its subsidiaries. During the year, Ascent's customer attrition levels remained elevated amid increasing entrants and competition in the home security alarm market. We exited our position as we lost confidence in the management team after a year of poor operational execution, ineffective capital allocation, and rising competition industrywide.

Portfolio Positioning

With regards to our portfolio positioning, our main allocations remain in the financial services, consumer discretionary and producer durables sectors. These three sectors account for approximately 60% of the portfolio's overall allocation.

In the consumer space, we continue to find a great deal of investment ideas which meet our investment criteria and retain a sizable overweight in this sector relative to the benchmark. With regards to financials, which accounts for approximately a quarter of the portfolio, we have a slight underweight relative to our benchmark. Within financials, we continue to favour those names that in our opinion are best positioned to navigate the interest rate and regulatory challenges in the sector and are run by conservative management teams with a solid track record of value creation. We maintained our overweight position in the producer durables sector and during the year selectively added to our exposure.

We continue to have an underweight exposure in the health care and technology sectors relative to our benchmark. While our health care exposure was relatively unchanged during the year, our underweight position in the technology sector has widened further. Historically, we have had a difficult time finding investment ideas in the health care and technology sectors given rapidly changing competitive landscapes in these sectors and our strict adherence to a disciplined investment process that prioritises companies with durable business models and sustainable cash flows.

Outlook

So where do we go from here? We have always been somewhat reluctant to make specific predictions about the market, as we think our talents lie in analysing and selecting specific stocks and building a portfolio from the bottom up, rather than making macroeconomic forecasts. However, we believe US equities can deliver reasonably good returns, although probably accompanied by rising volatility, and the transition to more normal interest rates that lies ahead may result in periodic turbulence for equity investors as has been the case in recent months.

The key reasons for our positive view on equities are that profits remain healthy and could possibly improve as headwinds from the strong US dollar and low energy prices moderate, the US consumer is in decent shape, and from a valuation perspective, comparative values between equities and bonds remain favourable for equities as an asset class.

Nevertheless, the year has certainly started on a sour note, with stocks down in January. The market seems concerned that slower growth in China and emerging markets may spread to the Eurozone and eventually to the US. Yet, we continue to expect the US to avoid a recession, although we are investing with a mindset of protecting our downside by requiring a margin of safety (as we always do). While 4th quarter US GDP grew at a disappointing 0.7% annual rate, non-manufacturing and energy related sectors appear to be in decent shape, and it is difficult to believe that the US could enter a recession with the housing market, banking sector, and employment situation on solid footing.

Despite recent market challenges, our fundamental outlook has not changed and we remain somewhat constructive on US equities, especially in light of improved valuations and reduced investor complacency. Given the recent sell-off, valuations are much more attractive in the small cap space today with the Russell 2000 Index trading at around 10.5x EV/EBITDA versus 13x at the market highs last summer. While we remain positioned defensively, we have been incrementally putting new money to work in terms of new ideas given gradually improving valuations and attractive risk-rewards.

Given our expectations for a potentially volatile and rather muted return environment, we believe stock selection will remain key. We will continue to stick to our investment process and judge the investment merits of each individual company and stock. We will remain disciplined with regards to our investment strategy: identifying companies with a sustainable competitive advantage, durable business models, and solid management teams who have a track record of value creation. We will buy stakes in these companies at valuations that we believe are below their intrinsic value and offer a margin of safety. Our sector weights will continue to reflect our bottom-up investment analysis and disciplined approach to portfolio construction.

Don San Jose

Dan Percella

Investment Managers                                                                                                                      17th March 2016

Principal Risks

The Directors confirm that they have carried out a robust assessment of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity. Except for the addition of the risk of Cybercrime, the risks identified have not changed over the year under review, and the ways in which they are managed or mitigated are summarised as follows:

With the assistance of the Manager, the Board has drawn up a risk matrix, which identifies the key risks to the Company. These key risks fall broadly under the following categories:

•   Investment and Strategy: an inappropriate investment strategy, for example excessive concentration of sector selection or the level of gearing, may lead to underperformance against the Company's benchmark index and peer companies, which may result in the Company's shares trading on a wider discount. The Board manages these risks by diversification of investments through its investment restrictions and guidelines which are monitored and reported on. The Manager provides the Directors with timely and accurate management information, including performance data and attribution analyses, revenue estimates, liquidity reports and shareholder analyses. The Board monitors the implementation and results of the investment process with the Investment Manager, who participates at all Board meetings, and reviews data which show statistical measures of the Company's risk profile. The Investment Manager employs the Company's gearing tactically, within a strategic range set by the Board. In addition to regular Board reviews of investment strategy, the Board holds a separate meeting devoted to strategy each year.

•   Loss of Investment Team or Investment Manager: a sudden departure of the investment manager, or several members of the investment management team could result in a short-term deterioration in investment performance. The Manager takes steps to reduce the likelihood of such an event by ensuring appropriate succession planning and the adoption of a team-based approach.

•   Discount: a disproportionate widening of the discount could result in a loss of value for Shareholders. In order to manage the Company's discount, which can be volatile, the Company operates a share repurchase programme.

•   Market: market risk arises from uncertainty about the future prices of the Company's investments. It represents the potential loss that the Company might suffer through holding investments in the face of negative market movements. The Board considers asset allocation, stock selection and levels of gearing on a regular basis and has set investment restrictions and guidelines, which are monitored and reported on by JPMAM. The Board monitors the implementation and results of the investment process with the Manager.

•   Political and Economic: changes in financial or tax legislation, including in the European Union and the US, may adversely affect the Company. The Manager makes recommendations to the Board on accounting, dividend and tax policies and the Board seeks external advice where appropriate. In addition, the Company is subject to administrative risks, such as the imposition of restrictions on the free movement of capital. These risks are discussed by the Board on a regular basis.

•   Accounting, Legal and Regulatory: in order to qualify as an investment trust, the Company must comply with Section 1158 of the Corporation Tax Act 2010 ('Section 1158'). Details of the Company's approval are given under 'Structure of the Company' above. Should the Company breach Section 1158, it may lose investment trust status and, as a consequence, gains within the Company's portfolio could be subject to Capital Gains Tax. The Section 1158 qualification criteria are continually monitored by JPMAM and the results reported to the Board each month. The Company must also comply with the provisions of the Companies Act 2006 and, since its shares are listed on the London Stock Exchange, the UKLA Listing Rules and Disclosure and Transparency Rules ('DTRs'). A breach of the Companies Act could result in the Company and/or the Directors being fined or the subject of criminal proceedings. Breach of the UKLA Listing Rules or DTRs could result in the Company's shares being suspended from listing which in turn would breach Section 1158. The Board relies on the services of its Company Secretary, the Manager, and its professional advisers to ensure compliance with the Companies Act 2006 and the UKLA Listing Rules and DTRs.

•   Corporate Governance and Shareholder Relations: details of the Company's compliance with Corporate Governance best practice, including information on relations with shareholders, are set out in the Corporate Governance report in the Annual Report and Accounts.

•   Operational: disruption to, or failure of, the Manager's accounting, dealing or payments systems or the depositary's or custodian's records could prevent accurate reporting and monitoring of the Company's financial position. On 1st July 2014, the Company appointed BNY Mellon Trust & Depositary (UK) Limited to act as its depositary, responsible for overseeing the operations of the custodian, JPMorgan Chase Bank, N.A., and the Company's cash flows. Details of how the Board monitors the services provided by the Manager and its associates and the key elements designed to provide effective internal control are included within the Risk Management and Internal Control section of the Corporate Governance report in the Annual Report and Accounts.

•   Cybercrime: The threat of cyber attack, in all its guises, is regarded as at least as important as more traditional physical threats to business continuity and security. JPMF has assured Directors that the Company benefits directly or indirectly from all elements of JPMorgan's Cyber Security programme. The information technology controls around the physical security of JPMorgan's data centres, security of its networks and security of its trading applications are tested by Deloitte and reported every six months against the AAF Standard.

•   Foreign currency: the Company has exposure to foreign currency as part of the risk reward inherent in a company that invests overseas. The income and capital value of the Company's investments can be affected by exchange rate movements as the majority of the Company's assets and income are denominated in currencies other than sterling which is the reporting currency. The Company's loan facility is denominated in US dollars.

The Board has the authority to reduce or eliminate the exposure to fluctuating currencies through the use of currency hedging. It reviews its policy on this matter regularly; to date no hedging has been carried out and there are no plans to do so in the immediate future.

•   Going concern: Pursuant to the Sharman Report, Boards are now advised to consider going concern as a potential risk, whether or not there is an apparent issue arising in relation thereto. Going concern is considered rigorously on an ongoing basis and the Board's statement on going concern is detailed in the Annual Report and Accounts.

•   Financial: the financial risks faced by the Company include market risk (comprising currency risk, interest rate risk and other price risk), liquidity risk and credit risk. Further details are disclosed in note 21 to the accounts.

Related Parties Transactions

During the year, no transactions with related parties have taken place which have materially affected the financial position or the performance of the Company.

Statement of Directors' Responsibilities

The Directors are responsible for preparing the annual report and accounts in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law, the Directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards) and applicable law. Under company law the Directors must not approve the financial statements unless they are satisfied that, taken as a whole, the annual report and accounts are fair, balanced and understandable, provide the information necessary for shareholders to assess the Company's position and performance, business model and strategy and that they give a true and fair view of the state of affairs of the Company and of the total return or loss of the Company for that period. In order to provide these confirmations, and in preparing these financial statements, the Directors are required to:

•     select suitable accounting policies and then apply them consistently;

•     make judgements and estimates that are reasonable and prudent;

•     state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and

•     prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Company will continue in business

and the Directors confirm that they have done so.

The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The accounts are published on the www.jpmussmallercompanies.co.uk website, which is maintained by the Company's Manager. The maintenance and integrity of the website maintained by the Manager is, so far as it relates to the Company, the responsibility of the Manager. The work carried out by the Auditor does not involve consideration of the maintenance and integrity of this website and, accordingly, the Auditor accepts no responsibility for any changes that have occurred to the accounts since they were initially presented on the website. The accounts are prepared in accordance with UK legislation, which may differ from legislation in other jurisdictions.

Under applicable law and regulations the Directors are also responsible for preparing a Directors' Report, Strategic Report, Statement of Corporate Governance and Directors' Remuneration Report that comply with that law and those regulations.

Each of the Directors, whose names and functions are listed in the Annual Report, confirms that, to the best of their knowledge:

·   the financial statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards) and applicable law, give a true and fair view of the assets, liabilities, financial position and return or loss of the Company; and

·   the Strategic Report and Directors' Report include a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.

The Board confirms that it is satisfied that the annual report and accounts taken as a whole are fair, balanced and understandable and provide the information necessary for shareholders to assess the position and performance, strategy and business model of the Company.

Davina Walter

Chairman                                                                                                                                         17th March 2016

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31ST DECEMBER 2015

		2015			2014
		Revenue	Capital	Total	Revenue	Capital	Total
		£'000	£'000	£'000	£'000	£'000	£'000
Gains on investments held at fair
value through profit or loss		-	5,007	5,007	-	12,132	12,132
Net foreign currency losses		-	(688)	(688)	-	(371)	(371)
Income from investments		1,728	-	1,728	1,390	-	1,390
Gross return		1,728	4,319	6,047	1,390	11,761	13,151
Management fee		(135)	(1,216)	(1,351)	(114)	(1,027)	(1,141)
Other administrative expenses		(407)	-	(407)	(402)	-	(402)
Net return on ordinary activities
before finance costs and taxation		1,186	3,103	4,289	874	10,734	11,608
Finance costs		(11)	(99)	(110)	(9)	(68)	(77)
Net return on ordinary activities
before taxation		1,175	3,004	4,179	865	10,666	11,531
Taxation		(246)	-	(246)	(218)	-	(218)
Net return on ordinary activities
after taxation		929	3,004	3,933	647	10,666	11,313
Return per share (note 2)		1.66p	5.35p	7.01p	1.15p	18.96p	20.11p

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued in the year.

The 'Total' column of this statement is the profit and loss account of the Company and the 'Revenue' and 'Capital' columns represent supplementary information prepared under guidance issued by the Association of Investment Companies.

STATEMENT OF CHANGES IN EQUITY

	Called up		Capital
	share	Share	redemption	Capital	Revenue
	capital	premium	reserve	reserves1	reserve1	Total
	£'000	£'000	£'000	£'000	£'000	£'000
At 31st December 2013	1,366	4,550	1,851	81,553	(2,981)	86,339
Shares issued	58	3,643	-	-	-	3,701
Repurchase of shares into Treasury	-	-	-	(1,350)	-	(1,350)
Costs of placing	-	(257)	-	-	-	(257)
Net return on ordinary activities	-	-	-	10,666	647	11,313
Dividend appropriated in the year	-	-	-	(398)	-	(398)
At 31st December 2014	1,424	7,936	1,851	90,471	(2,334)	99,348
Shares issued from Treasury	-	110	-	414	-	524
Net return on ordinary activities	-	-	-	3,004	929	3,933
At 31st December 2015	1,424	8,046	1,851	93,889	(1,405)	103,805

¹        These reserves form the distributable reserves of the Company and may be used to fund distributions of profits to investors via dividend payments.

STATEMENT OF FINANCIAL POSITION AT 31ST DECEMBER 2015

		2015	2014
		£'000	£'000
Fixed assets
Investments held at fair value through profit or loss		113,980	105,663
Investment in liquidity fund held at fair value through
profit or loss		3,293	2,264
		117,273	107,927
Current assets
Debtors		180	216
Cash and short term deposits		5	907
		185	1,123
Creditors: amounts falling due within one year		(13,653)	(9,702)
Net current liabilities		(13,468)	(8,579)
Total assets less current liabilities		103,805	99,348
Net assets		103,805	99,348
Capital and reserves
Called up share capital		1,424	1,424
Share premium		8,046	7,936
Capital redemption reserve		1,851	1,851
Capital reserves		93,889	90,471
Revenue reserve		(1,405)	(2,334)
Total equity shareholders' funds		103,805	99,348
Net asset value per share (note 3)		184.3p	177.3p

Company registration number: 552775.

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31ST DECEMBER 2015

		2015	2014
		£'000	£'000
Net cash outflow from operations before dividends and interest		(1,506)	(1,359)
Interest paid		(110)	(71)
Taxation		16	23
Dividends received		1,494	1,164
Interest received1		10	4
Net cash outflow from operating activities		(96)	(239)
Purchases of investments2		(27,297)	(31,048)
Sales of investments2		23,705	28,203
Settlement of foreign currency contracts		2	(7)
Net cash outflow from investing activities		(3,590)	(2,852)
Dividends paid		-	(398)
Issue of ordinary shares		-	3,701
Costs of placing		-	(257)
Repurchase of the Company's own shares into Treasury		-	(1,350)
Shares re-issued from Treasury		524	-
Repayment of short term bank loan		-	(6,013)
Draw down of short term bank loan		3,289	9,197
Net cash inflow from financing activities		3,813	4,880
Increase in cash and cash equivalents		127	1,789
Cash and cash equivalents at start of year		3,171	1,382
Cash and cash equivalents at end of year		3,298	3,171
Increase in cash and cash equivalents		127	1,789
Cash and cash equivalents consist of:
Cash and short term deposits		5	907
Investment in liquidity fund		3,293	2,264
Total		3,298	3,171

¹        Includes receipts from liquidity funds.

²        Excludes liquidity funds.

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST DECEMBER 2015

1.    Accounting policies

(a) Basis of accounting

The financial statements are prepared in accordance with the Companies Act 2006, United Kingdom Generally Accepted Accounting Practice ('UK GAAP') including FRS 102 'Financial Reporting Standard applicable in the UK and Republic of Ireland' and the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' (the 'SORP') issued by the Association of Investment Companies in November 2014.

All of the Company's operations are of a continuing nature.

The financial statements have been prepared on a going concern basis.

2.   Return per share

The revenue return per share is based on the earnings attributable to the ordinary shares of £929,000 (2014: £647,000) and on the weighted average number of shares in issue during the year of 56,159,613 (2014: 56,265,899).

The capital return per share is based on the capital return attributable to the ordinary shares of £3,004,000 (2014: £10,666,000) and on the weighted average number of shares in issue during the year of 56,159,613 (2014: 56,265,899).

The total return per share is based on the total return attributable to the ordinary shares of £3,933,000 (2014: £11,313,000) and on the weighted average number of shares in issue during the year of 56,159,613 (2014: 56,265,899).

3.   Net asset value per share

The net asset value per share is based on the net assets attributable to the ordinary shareholders of £103,805,000 (2014: £99,348,000) and on the 56,325,928 (2014: 56,040,928) shares in issue at the year end, excluding shares held in Treasury.

4.   Status of announcement

2014 Financial Information

The figures and financial information for 2014 are extracted from the published Annual Report and Accounts for the year ended 31st December 2014 and do not constitute the statutory accounts for that year. The Annual Report and Accounts has been delivered to the Registrar of Companies and included the Report of the Independent Auditors which was unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.

2015 Financial Information

       The figures and financial information for 2015 are extracted from the Annual Report and Accounts for the year ended 31st December 2015 and do not constitute the statutory accounts for the year. The Annual Report and Accounts includes the Report of the Independent Auditors which is unqualified and does not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006. The Annual Report and Accounts will be delivered to the Registrar of Companies in due course.

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement

JPMORGAN FUNDS LIMITED

17th March 2016

For further information:

Lucy Dina,

JPMorgan Asset Management (UK) Limited, 020 7742 4000

ENDS

A copy of the annual report will shortly be submitted to the National Storage Mechanism and will be available for inspection at www.morningstar.co.uk/uk/NSM

The annual report will also shortly be available on the Company's website at www.jpmussmallercompanies.co.uk where up to date information on the Company, including daily NAV and share prices, factsheets and portfolio information can also be found.

JPMORGAN FUNDS LIMITED

 

END

 

 

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